Highlights
Prices are up for steel and aluminum but overall wholesale prices proved subdued in April. The headline increase of only 0.1 percent is 2 tenths below Econoday's consensus and 1 tenth below the low estimate. When excluding food, where prices fell 1.1 percent, and also energy, which inched only 0.1 percent higher, producer prices did manage an as-expected 0.2 percent increase. When excluding food and energy and also a 0.2 percent gain for trade services, the result is only plus 0.1 percent which, like the headline, is below the low estimate.

Steel products rose a steep 3.2 percent in April vs a 1.9 percent rise in March when tariffs were first imposed, with aluminum up 1.8 percent in April after a 1.4 percent rise in March. Year-on-year rates are very elevated: up 7.4 percent for steel and 11.9 percent for aluminum.

Yet overall year-on-year rates are not elevated at all in fact are slipping, down 4 tenths overall to 2.6 percent for the headline. The two core readings also shed 4 tenths each, to 2.3 percent for ex-food ex-energy and 2.5 percent when also excluding trade services.

Other readings include no monthly change for cars and a 0.1 percent decline for light trucks. Cigarette costs spiked at the wholesale level, up 3.2 percent on the month. Another outsized increase is in construction costs, up 1.1 percent which could indirectly reflect tariff effects and related scarcity of building materials.

Personal consumption measures, which offer hints at the next set of PCE price data, are very subdued, down 0.1 percent overall and also for ex-food ex-energy following only 0.1 percent rises for both in March. Year-on-year rates are at 2.8 percent overall and 2.1 percent ex-food ex-energy which are down 6 and 7 tenths respectively from March in results that do not point to a repeat of March's big spikes in the PCE yearly rates.

Tariffs may be adding some pressure at the base of the wholesale price pipeline, but there's no evidence of it moving higher. For a Federal Reserve that is increasingly conscious of an upward risk to inflation, today's results do not raise many alarms. Watch tomorrow for consumer prices where only limited incremental upward pressure is the call.

Consensus Outlook
Moderate inflation has been the trend for producer prices and moderate increases are the forecasts for April: at 0.3 percent for headline PPI-FD, at 0.2 percent excluding food and energy, and at 0.3 percent when excluding food, energy and trade services. Steel prices did show tariff effects in this report in March and further pressure would be closely noted.

Definition
The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measures the average change over time in the prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. Effective with the January 2014 PPI data release in February 2014, BLS transitioned from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. The headline PPI (for Final Demand) measures price changes for goods, services, and construction sold to final demand: personal consumption, capital investment, government purchases, and exports.
Why Investors Care

With the redefined and expanded PPI Final Demand series, energy still creates monthly volatility. However, services and construction have softened the headline and core numbers.Data Source: Haver Analytics

A sluggish economy in 2013 and
2014 slowed inflation at the
producer level.Data Source: Haver Analytics